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This paper develops and estimates a dynamic model of employment and child care decisions of women after birth in order to evaluate the effects of mothers' decisions on children's cognitive ability. I use data from the NLSY to estimate the model. The results suggest that the effects of maternal employment and child care usage on children's cognitive ability are not negligible. In fact, having a full-time working mother who uses child care during the first 5 years after the birth of the child is associated with a
10.4% reduction in ability test scores. Based on the estimates of the model, I assess the impact of policies related to parental leave, child care and other incentives to stay at home after birth on women's decisions and children's outcomes.

In this paper I focus on the labor supply and child care decisions of women immediately following birth, in order to evaluate the effects of mothers' decisions on the well-being of their children. In particular, I am interested in assessing the impact of both employment and child care decisions on children's cognitive ability. Previous studies have provided evidence that test scores measured early in a person's life have significant effects on future educational and labor market outcomes29. It seems at least interesting to try to understand whether there are any parental inputs that can enhance cognitive ability of individuals during their early stages of life. For this purpose I use data from the National Longitudinal Survey of Youth and, in particular, I look at the quarterly employment and child care histories of women after birth and until their child enters primary school at age 5. I assess the impact of these histories on Peabody Picture Vocabulary Tests scores and Peabody Individual Achievement Test scores (Math and Reading Sections). The key issue dealt with in the paper is the potential endogeneity problem that arises as a result of the existence of unobserved characteristics of both mothers and children. In fact, women are heterogeneous in both the constraints they face and their tastes. At the same time, children are heterogeneous in their cognitive endowments. As we would expect, mothers' decisions with respect to working when children are young, and/or placing children in child care are influenced by these heterogeneous characteristics of both mothers and children. Hence, children of working women or children of women that use child care will differ systematically from those whose mothers stay at home or do not use child care. This sample selection issue makes evaluation of the effects of women's decisions on child outcomes very difficult.

Bibliography Citation

Bernal, Raquel. "Employment and Child Care Decisions of Mothers and the Well-being of their Children." EconPapers No. 361, Econometric Society 2004 North American Winter Meetings, August 2004.

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This paper evaluates the effects of maternal time inputs and alternative providers' time inputs on children's cognitive development using the sample of single mothers in the National Longitudinal Survey of Youth (NLSY). In order to deal with the selection problem that arises when trying to assess the impact of mothers' employment and child care choices on children's development, we take advantage of the exogenous variation in employment and child care choices generated by the differences in welfare regulations across states and over time introduced by the Welfare Reform (1996) and prior to that by Section 1115 Welfare Waivers. In particular, we construct a comprehensive set of welfare policy variables at the individual and State level and use them as instrumental variables in order to identify the effects of maternal employment, child care and labor income on children's cognitive development. The results indicate that the effect of maternal employment on children's achievement is positive but insignificant. The effect of child care use is negative, significant and rather sizeable. In particular, one additional quarter of child use is associated with a reduction of 0.50% in test scores. In addition, the effect of income is significant and positive and in most cases large enough to offset the negative effect of child care. Finally, the negative effect of child care seems to be related to a significant negative effect of child care used after the first year after childbirth and mostly from the use of informal child care.

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The authors focus on the differences in the household demand functions that derive from the neoclassical model on the one hand, and the bargaining solutions on the other hand. Using data for households which include nonworking wives, the authors obtain estimates of leisure demand functions which are based on our most general bargaining models and test various restrictions on them. The empirical results indicate that the neoclassical restrictions are not appropriate for our data. Specifically, the test for equal effects of male and female incomes on household demands is rejected and symmetry of the Slutsky Matrix is also rejected. The authors offer a bargaining approach as an alternative to the neoclassical complete system of demand equations.

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Understanding the consequences of growing up poor for a child's well-being is an important research question, but one that is difficult to answer due to the potential endogeneity of family income. Past estimates of the effect of family income on child development have often been plagued by omitted variable bias and measurement error. In this paper, we use a fixed effect instrumental variables strategy to estimate the causal effect of income on children's math and reading achievement. Our primary source of identification comes from the large, non-linear changes in the Earned Income Tax Credit (EITC) over the last two decades. The largest of these changes increased family income by as much as 20%, or approximately $2,100. Using a panel of over 6,000 children matched to their mothers from National Longitudinal Survey of Youth datasets allows us to address problems associated with unobserved heterogeneity and endogenous transitory income shocks as well as measurement error in income. Our baseline
estimates imply that a $1,000 increase in income raises math test scores by 2.1% and reading test scores by 3.6% of a standard deviation. The results are even stronger when looking at children from disadvantaged families who are affected most by the large changes in the EITC, and are robust to a variety of alternative specifications.

Bibliography Citation

Dahl, Gordon B. and Lance John Lochner. "The Impact of Family Income on Child Achievement." Presented: London, England, Econometric Society 2005 World Congress, 19 - 24th August 2005.

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This study investigates determinants of labor supply for husbands and wives, and hours of non-market work and fertility for wives. In addition, labor supply, hours of non-market work, and fertility are predicted for widowed, divorced, and separated women. The data are the NLS of Young Women for 1972 when the women were ages 18 to 28 and the NLS of Mature Women for 1967 (ages 30 to 44). Labor supply and fertility elasticities are shown to vary by age, marital status, and race for women, while labor supply elasticity is found to differ by race for husbands.

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This study explores whether black and white male and female youth differ in their education goal and planned occupation. A simultaneous equations model is fitted using two stage least squares, in which education goal and planned occupation (measured by occupational prestige) at age 30 for males and 35 for females are the endogenous variables. Youth evidently are better able to plan their educational goal than their occupation goal. Evidence of supply side discrimination exists in that race affects desired occupation, while sex, race, and sex and race interacted affect desired education.

There has been considerable interest in both labor economics and macro economics in estimating the intertemporal elasticity of substitution for labor supply. In this paper, I solve and estimate a dynamic model that allows agents to optimally choose their labor hours and consumption over a continuum of positive real numbers, and that allows for both human capital accumulation and savings. Estimation results and simulation exercises indicate that the intertemporal elasticity of substitution is much higher than those estimated by MaCurdy (1981) or Altonji (1985), and that their estimates are biased downwards because of the omission of the human capital accumulation effect. The human capital accumulation effect renders the life-cycle path of the shadow wage relatively flat, even though wages increase significantly with age. Hence, a rather flat lifecycle labor supply path can be reconciled with a high intertemporal elasiticity of substitution.

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This article focuses on the use of the error components model to measure the effect of labor market conditions on rate-of-return differentials between races. The statistical procedure used in this study measures business activity by the unemployment rate. In an earnings equation, the interaction between schooling and unemployment rate variables show that schooling rates of return declined as business conditions worsened for blacks.

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In the present paper, some light is shed on the causes of male-female and black-white wage differentials. One of the important contributions of the present research is to compare the results for a more recent cohort of young people with earlier studies which examined older cohorts of persons over age twenty-five. In this paper we employ the measure of discrimination proposed by Alan Blinder, which involves decomposing characteristics into differences arising from endowments (differences in mean values) and differences in coefficients (market rewards for given levels of endowments).

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Blacks have lower marriage rates and lower average schooling than whites. I estimate a static model of marriage and schooling simultaneously to identify the causal effect of schooling on their marriage probabilities. I find that schooling ultimately increases the marriage probabilities of all but white women. The schooling coefficient is significant for men only and its magnitude is 6% and 1.3% for black and white men, respectively. If all black men are assigned 18 years of schooling, then their marriage rate becomes higher than that of white men. This emphasizes the role of schooling in marriages.

Bibliography Citation

Nandi, Alita. "The Role of Education in Marital Decisions of Blacks and Whites." Presented: London, England, 9th World Congress of the Econometric Society, August 2005.

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In "Women's Economic Gains from Employment, Marriage and Cohabitation" I ask which of the mechanisms--employment, marriage or cohabitation--leads to greater economic gains, especially for women predisposed towards poverty. Using data from the NLSY79, I estimate a fixed-effects model of household income (adjusted for household composition) to assess the within-person gains associated with changes in employment and marital status; I allow the effects of employment on household income to differ for single, cohabiting, and married women. First I predict that the log household income of single, nonemployed, "poor" (those who ever received welfare) women increases by 0.80, if they enter a cohabiting union, 1.04 if they marry, 0.76 if they work part-time (1000 hours/year), and 1.16 if they work full-time (2000 hours/year). Next I find that the expected gains from cohabitation, marriage and employment for nonpoor women are greater than those for their poor counterparts. For any of the transitions, the poor-nonpoor difference in predicted gains declines as the initial employment levels increase.

Bibliography Citation

Nandi, Alita. "Women's Economic Gains from Employment, Marriage and Cohabitation." Presented: Budapest, Hungary, 62nd European Meeting of the Econometric Society: Joint With the 22nd Annual Congress of the European Economic Association, August 2007.